8 challenges Software Vendors encounter while growing Subscription-based revenue

Running a recurring Software business takes work. The complexities of subscription management and billing make many an ISV business and software vendors tangled in the day-to-day running of the company while driving their focus away from innovation. If you want to meet your customers’ requirements and expectations, you need to take an in-depth look at several aspects of your business.

These include your current tools, approaches, and methodologies to manage subscribers, share data between multiple systems, and enable seamless integration with other systems. All this must be addressed while minimizing manual effort, curtailing revenue leakage, and boosting business growth.

Key warning signs to look for

Effective management of the subscription renewal process is a Herculean task for any software vendor. Challenges with invoicing changes with additions and reductions are just too many, which makes customer billing long and inefficient. At the same time, ad-hoc tools and approaches to subscription management make it difficult to scale while forcing businesses to cross several hurdles in standardizing the invoicing and payment collection process.

Are you facing difficulties tracking and managing your customers, offering discounts, and enabling customer pricing tiers? If yes, it’s time to dive deep into the gaps and inefficiencies in your current business.

How to increase your recurring revenue?

5 quick tips to improve revenue with smarter and
efficient provisioning and subscription management

Here are the challenges software vendors face when growing recurring revenue

You’re relying on Excel spreadsheets to manage customers

In today’s cloud era, a significant overhaul is needed if your software vendor is still maintaining subscription and billing details in Excel spreadsheets and responding to customer emails manually. Unfortunately, such manual efforts are time-consuming and prone to error.

Adopting cloud-based subscription management tools that offer a high level of automation is what modern software vendors need to streamline the subscription billing and recurring revenue process.

You’re struggling to streamline subscription management

Managing a subscription business is enormously complicated and requires organizations to consider an array of aspects: billing period and contract term to renewal dates, usage, pricing tier, location, sales channel, payment method, and more. Instead of carrying out day-to-day subscription management activities manually, leverage automation to streamline the subscription management process.

Automation can help improve cross-sell and up-sell opportunities and allow employees to reach out to customers with suitable value-added offers in an accelerated manner. You can also use automation to standardize critical tasks across the subscription lifecycle and improve how you calculate and track prorations/refunds, enable price indexation, and offer tiered pricing and discounts.

Your product bundles are hard to manage, bill and provision

Creating unique product bundles that include products from the Microsoft CSP Catalog isn’t easy – mainly if your teams use different systems for carrying out various aspects of the business.

So, for example, if you want to create the most accurate product bundles and drive sales, you need to bridge data and tool silos. Make sure to integrate your subscription and billing systems with your enterprise CRM system better to manage your product catalog and associated price lists.

It would be best if you had help managing renewals efficiently.

As more and more customers enter and leave the subscription business, renewal management becomes highly challenging. From several points of contact to incorrect or outdated information, poor visibility into customer history, advanced pricing strategies such as indexation, lack of transparency in contracts, and different contract terms to other partners and volumes – managing renewals using siloed tools and processes makes the process extremely inefficient.

To streamline the renewal management process, you need to use AI and analytics capabilities to get more insight into your business, customers, and operations and get guidance on overcoming those gaps. You also need to provide your customers with a self-service portal, so they can view and edit their subscriptions and manage renewals themselves – without reaching out to a customer service agent – thus driving better business value and customer satisfaction.

You are provisioning and billing in different systems

Using other apps and systems to manage day-to-day subscription activities is a significant cause of revenue leakage for software vendors. Poor data-sharing between apps means teams constantly switch between different interfaces. To overcome such misalignment, you need to adopt a centralized system that takes care of all activities in a unified manner.

Such an automated billing system enables accurate and timely customer billing. In addition, it helps you efficiently manage proration, refunds, and pricing changes, automatically generate invoices for different customers and accelerate the cash collection process.

Your sales process, pricing strategy, and billing need to be aligned.

For ISVs, setting subscription pricing can be grueling. Finalizing product prices based on competition or gut cannot and won’t work in the long term. Since the most profitable pricing strategies put customers at the front and center, you need to curate pricing strategies that go hand in hand with your customers’ purchasing and usage habits. In addition, you can enable value-based pricing for your products by utilizing customer data on the overall value of your products.

Or you can opt for tiered pricing models and offer customers multiple pricing options when they sign up for your products. You can also offer usage-based pricing, giving customers the luxury to pay only for the services they use – instead of fixing your pricing.

Your billing solution doesn’t integrate with your accounting system.

Accounting and Finance departments have unique challenges when managing and reporting a recurring revenue-based business. Revenue recognition, deferred revenue, cash flow, and reporting on revenue quality – net new vs. renewal vs. upsell-cross-sell are all challenges. While the latest versions of ERPs and accounting systems cater to subscription-based businesses, they usually lack billing capabilities.

(Billing is the process that generates the data – actions, events, dates, and contract terms that determine what goes into an invoice).

When your billing solution integrates with your accounting software, you can streamline processes, reduce revenue leakage and provide a much better customer experience (an invoice is a customer-facing entity). The integration typically is Customers, Invoices (Invoice Details), and Products.

Your customers are offered only one billing cycle

In today’s customer-centric era, customers expect a high amount of flexibility in the products, subscription mode, billing method, payment terms, and billing cycle. Since what’s best for one customer isn’t always best for another, you need to offer different billing cycles to meet the diverse needs of other customers – especially as your client list grows.

Leveraging an automated billing solution that enables your team to offer multiple billing frequencies is a great driver of your subscription business’s growth.

Conclusion

If you want to sell, manage and grow your subscription services quickly and easily, you must ensure the tools and methodologies you use align with the latest trends and customer requirements. Updating your subscription business by eliminating manual processes and embracing automation is a great way to drive customer satisfaction, improve business growth, and limit revenue leakage.

Learn how Work 365 can help you manage your ISV/SaaS billing/Software Vendors effectively with a single subscription management and billing automation solution that integrates seamlessly with your processes and applications.

Understand changes a Microsoft Partner needs to make to eliminate roadblocks and scale business growth.

Download eBook